Residential property markets in Abu Dhabi and Dubai are slowly attracting investors back after years of economic instability.

Villa and apartment sales in the two locations – both in the United Arab Emirates – are up significantly on last year, but the gains are modest compared with the market peak of 2008.

“I don’t expect to get back to those levels at all,” says CBRE’s head of research and consultancy in the UAE, Matthew Green. “But what we are seeing now is more investment in good quality assets.”

In the economic shakeout four years ago, expatriates abandoned villas, dumped cars at the airport and left a region in turmoil. As a sobering reminder, Dubai is still littered with half-finished construction sites.

But the Arab spring has bolstered the UAE’s profile as one of the more stable political environments in the Middle East.

Thanks to a high gross domestic product per capita – about $US44,000 in 2011 – social unrest has not been an issue in the UAE, Green says.

In Dubai, developers are kick-starting a handful of projects and properties are starting to sell.

Dubai Land Department figures show residential unit transactions totalled 3.1 billion dirhams ($828 million) in the March quarter of 2012 – up 9 per cent on the same quarter last year.

“The projects which are doing well are the more established community locations,” Green says. “There’s still a lot of new developments here and they tend to be the ones under pressure . . . as they’re less attractive to occupiers because the infrastructure and facilities aren’t all in place.”

He singles out Downtown Dubai, the Palm Jumeirah, Emirates Living and Dubai Marina as premium quality residential offerings. One of the highest profile developments in Dubai before the economic fallout, Nakheel’s Palm Jumeirah, has seen its high-end residential offering rise 7 per cent over 12 months to 1500 dirhams ($398) per square metre, reports CBRE.

Panorama at The Views – the newest residential project from Dubai-based Emaar Properties (the same developer behind the world’s tallest tower, the Burj Khalifa) – sold out of its 224 apartments in a single day in May.

The developer of Dubai Festival City, Al-Futtaim Group Real Estate, has begun selling freehold homes on site, having previously only leased properties to buyers.

The luxurious four- and five-bedroom homes start at 4.3 million dirhams. Before this phase of sales, Al-Futtaim Group Real Estate last sold residential properties at Dubai Festival City five years ago, well before the GFC.

“Dubai is now firmly on a growth track,” Dubai Festival City general manager of property sales Ian Plumley says.

Abu Dhabi, considered about half a decade behind its neighbour Dubai, is close to the peak of its development cycle, says Green.

“So you’re seeing a significant amount of new product being added to the market.”

This includes areas at the Corniche, Saadiyat Island and Al Raha Beach.

“The completion and release of new quality residential accommodation will broaden available options for occupiers and heighten competition among landlords to secure tenancies,” Green says.

“[But] the sheer weight of new options in the market is likely to maintain a downward trend in both sales and lease rates, although the declines have slowed significantly as compared to the worst of the real estate downturn.”

At Al Raha Beach, luxury home values are down 7 per cent to 1250 dirhams per square metre, CBRE reports.

But Aldar Properties director of sales and commercial leasing Rami Nasser says Al Raha Beach has been receiving a high level of interest from buyers.

“[These] are the first beachfront residential developments in Abu Dhabi available for purchase by national and international buyers, with prices starting at around 700,000 dirhams for a one-bedroom apartment,” Nasser says, In total, Aldar has sold almost 90 per cent of the 3177 units at Al Raha Beach.

Tourism Development & Investment Company, the major developer of Saadiyat Island, has been recording exceptional sales levels since it began placing properties at The Residences, at the St Regis Saadiyat Island Resort, and Saadiyat Beach Villas up for sale or lease.

Dubai was a property investment hot spot for celebrities in the years leading up to the Emirates economic meltdown. But whether they have stayed on and worn the massive losses from their investments or exited Dubai’s residential property market is unclear.

Hollywood power couple Brad Pitt and Angelina Jolie bought an island shaped like Ethiopia at The World development in 2007.

The World, a project by Nakheel, is an artificial archipelago of various small islands roughly shaped like a world map.

But since its inception, barely any development activity has occurred on-site and Nakheel – one of Dubai’s most respected real estate developers before the market crash – is embroiled in a number of legal proceedings due to project delays.

Brangelina aren’t the only two to have lost money during the downturn. Singer Rod Stewart and billionaire Richard Branson are also said to have bought plots at The World.

At Nakheel’s other high-profile development, the Palm Jumeirah, David and Victoria Beckham were gifted a villa valued at $US16 million at the height of the market to help bolster the development’s profile.

As the economy slumped and the Beckham’s property halved in value, the soccer star reportedly gave the villa to his wife’s parents. LC